Boeing Co. is coming to this year's Paris Air Show with some hard choices that will go far in determining who comes out on top in the jetliner duopoly it shares with Airbus SE.
Reeling from the grounding of its most important aircraft after two deadly crashes, Boeing will need to consider its timeline and strategy for new models. Piling on pressure is Airbus's likely unveiling of a long-range variant of its A321 model, potentially siphoning off more business from its U.S. rival in the increasingly important market for mid-range planes.
The cat-and-mouse game over jets to be rolled out during the next decade is one of the top issues for Boeing Chief Executive Officer Dennis Muilenburg as he meets customers and faces the public at the industry's biggest gathering, which kicks off Mondayat Le Bourget airport north of Paris.
His choices: spend big on a so-called mid-market airplane to stanch customer defections to the A321. Or plow that $15 billion or so into the 737 Max's successor -- a scenario that has gained considerable urgency now that the Max grounding is in its fourth month and some customers are considering dropping their orders outright.
If Boeing doesn't strike just the right balance, "Airbus has a clear path to 60% market share for the next 10 to 15 years," said Henri Courpron, chairman and founder of Plane View Partners and a former executive in the aircraft-leasing business. "Airbus is sitting pretty and waiting to see Boeing show its hand."
The dynamic is reminiscent of a showdown in 2011 when Airbus upset the balance of power by pulling in a massive order from American Airlines, a longtime Boeing customer, thanks to a new-engine option on its single-aisle planes. That shocked Boeing into responding with the 737 Max, the model that is now at the heart of the deep crisis buffeting the company.
The European planemaker last year gained control of the A220, the most technologically advanced aircraft in the segment, from struggling Bombardier Inc. Boeing recently countered by forming a commercial-aircraft joint venture with Embraer SA.
Boeing wouldn't discuss its plans for the mid-market airplane or an eventual 737 replacement.
"I feel very confident in the Max family of aircraft," Muilenburg said May 29, when asked about a future single-aisle plane. "So we have not changed our expectations on the longevity of that line. But we'll continue to keep an eye on those more distance future product opportunities, as well."
Airbus declined to comment on its plans for any product announcements at the show, the first time new CEO Guillaume Faury will oversee the action.
American, India's IndiGo, JetBlue Airways and aviation entrepreneur David Neeleman have all expressed interest in the proposed A321XLR, the new model Airbus is studying to clip sales from Boeing's proposed mid-range jet. The latest A321 would be available by 2023 or 2024, a year ahead of the Boeing airplane, with the range to cruise between, say, central Europe and the middle of the U.S.
Airbus already leads in the lucrative sales of the narrow-body planes that form the backbone of most fleets and are favored by budget carriers. Falling farther behind would threaten Boeing's ability to command price discounts from suppliers in an industry driven by volume. And its dominance of wide-body jet orders would be eroded if Airbus's sales team took full advantage of their growing customer base, said aerospace consultant Richard Aboulafia.
He even sees a scenario in which the historic relationship between the two duopolists is reversed, "where air transport is identified with Airbus, and Boeing is seen as this second player," said Aboulafia, a vice president at the Teal Group in Fairfax, Va.
None of Boeing's options is easy. The planemaker has spent years searching for digital production advances that could bring its planned twin-aisle design closer to a single-aisle jet's costs. While abandoning that effort for a 737 replacement might seem like the right thing to do given the Max backlash, moving too soon could be financially ruinous, turning a trickle of canceled Max orders into a flood.
"I think that would be a big mistake," said Adam Pilarski, senior vice president with Avitas, and a former chief economist and director of strategic planning with Douglas Aircraft Co. "I'm not saying you don't need it -- the answer is you do. But do the [mid-market plane] first, learn from it."
The Boeing plane would slot into the space left open by its aging 757 and 767 jetliners. Dubbed the 797 by analysts, the plane would also be the only all-new aircraft in an industry that has relied in recent years on upgrading existing airframes, like the A320 family or the 777X, a bigger, more powerful version of Boeing's popular long-range jet.
The mounting Max-related bills are staggering: from storing 500-plus grounded planes to the 73 lawsuits, and counting, filed against Boeing so far for the Lion Air crash in October and a fatal Ethiopian Airlines accident in March.
Press coverage of the air shows often focuses on who logs the most sales, Boeing or Airbus.
"Airbus tends to stockpile or hold on to orders to announce at the air show, so I would certainly expect more activity out of Airbus than Boeing" in Paris, said Ken Herbert, an aerospace analyst for Canaccord Genuity. "I don't think that will surprise anybody, considering the Max and everything else."
There are troubling signs for the commercial aircraft industry in general. After several years of surging growth, passenger traffic in March grew at the weakest rate in nine years, although April was slightly better. The chief of the International Air Transport Association, a global airline trade group, blamed a slowing global economy and damage from tariffs and trade fights.
Air cargo shipments -- considered a leading economic indicator -- fell 4.7% in April, continuing a slump that began in January and could dent demand for air freighters.
Information for this article was contributed by Julie Johnsson, Benjamin Katz and Janan Hanna of Bloomberg News; and by David Koenig of The Associated Press.
Business on 06/15/2019